A HECS debt may be considered the same as a conventional loan, depending on the lender. That said, it shouldn’t prevent you from getting a home loan; it’s just something your lender will take into account when determining your borrowing capacity. Take a look at how much you still owe before applying for a house loan. When it’s time for your lender to investigate your financial condition, it’ll be a lot easier.
Can banks see HECS debt?
Yes, in a word. A lender will ask you for information about your income and expenses, as well as your assets and obligations, when you apply for a home loan. This covers any student debt you may have, whether it’s HECS-HELP debt, FEE-HELP debt, or another type of student loan.
Does university debt affect getting a mortgage?
Although lenders will take your debt into account, having student loans should not prohibit you from getting a mortgage.
Does HECS count as outstanding debt?
If you studied at an Australian institution, you are likely to have a HECS/HELP debt. With a higher education debt owed, you can still receive your first home loan, albeit it may impair your mortgage application, just like other outstanding loans.
HECS/HELP in brief
The Higher Education Loan Plan (HELP) was previously known as the Higher Education Contribution Scheme (HECS) (HECS). This government program allows eligible Australians to borrow money to pay for their tertiary education.
Interest is not imposed on a HECS/HELP debt, unlike regular loans. Instead, your HECS/HELP debt is indexed to Australia’s Consumer Price Index (CPI), which means that your debt grows in lockstep with inflation. While this implies that your education may cost more than you anticipated, you’re also less likely to find yourself in a scenario where your debt grows faster than you can pay it off (like with some credit cards or personal loans).
Car loans, home loans, and credit cards are all repaid differently than HECS/HELP obligations. Instead of making regular repayments from your paycheck, once you earn a salary beyond a certain threshold, a percentage of your earnings will be set away to pay down your student debt. The more the percentage of your income that goes toward your HECS/HELP, the higher your income.
What does a HECS/HELP debt mean for a mortgage?
With an outstanding HECS/HELP debt, it is absolutely possible to apply for a home loan and be approved. A HECS/HELP debt, on the other hand, can hinder a mortgage application in two ways:
- You’ll effectively be taking home slightly less income from your work while paying off a greater education debt. As a result, you’ll have less money available to pay your mortgage. This may limit your overall borrowing capacity — you may not be able to take out as large a loan, and your real estate options may be limited as a result.
- While a HECS/HELP loan is unique from most other types of credit, it is still a debt. When you apply for a home loan, lenders will want to know about all of your obligations and credit products, including vehicle loans, credit cards, and more. The more money you owe now, the less likely it is that a bank will lend you more money, thus placing you in financial trouble.
Could paying off my HECS/HELP debt help me get a mortgage?
It is possible to make additional payments to your HECS/HELP debt in addition to the payments that are deducted from your normal wage. This can help expedite the debt repayment process, putting you in a better position to apply for a mortgage or refinance an existing house loan. Contact the Australian Tax Office for further information on making additional HECS/HELP payments (ATO).
If a bank is hesitant to lend you more money because you already owe money, paying off your obligations may boost your mortgage application’s chances of acceptance. Paying off your automobile, canceling your credit cards, and paying off your HECS/HELP debt can all increase your chances of getting a home loan.
When your HECS/HELP loan is paid off, the portion of your income that was previously used to make repayments can now be put back into your pocket. You may be able to borrow more money to buy a home if you have more income available to put toward repayments.
While paying off your HECS/HELP debt may help you qualify for a mortgage, there are other activities you can do to improve your chances, such as lowering your credit card’s maximum limit or double-checking your credit history for any inaccuracies. Based on your unique financial position, a mortgage broker may be able to provide you more advice on how to improve the odds of your house loan application being approved.
Do uni fees affect mortgage?
If you have any outstanding student debt, such as HECS debt, your loan application may be hampered. That’s because, while your loan payments aren’t deducted from your spending money, they do have an impact on the amount of money that comes into your account each month.
When your income exceeds a specific level – presently $51,957 per year – you must begin repaying any HECS debt. And, depending on your income, the amount you must repay could be significant.
If you make more than $107,214 per year, for example, you must return your HECS loan at an annual rate of 8% of your income.
Do mortgage lenders look at student loans?
Lenders’ Perspectives on Student Loans To buy a home or qualify for a mortgage, you don’t have to be completely debt-free. However, your current debt, particularly any related with your student loan, is one of the most critical factors that lenders assess when considering you for a loan.
Does student loan debt affect credit score?
Your credit report will include the amount of your student loan and your payment history. Making on-time payments can help you retain a good credit score. Failure to make payments, on the other hand, will lower your credit score. Having a solid credit history and credit score now will help you receive credit at a reduced interest rate later on. If you believe you will be unable to make your payments, contact your servicer for more information.
Is HECS repayment automatic?
For example, if you are an eligible student, the Australian government will cover your education fees under the HECS-HELP scheme.
The loan is paid directly to your educational institution by the Australian government.
When your income exceeds a particular level ($46,620 for the 2020-21 financial year), loan repayments are made through the Australian tax system. Regardless of income, voluntary repayments can be made at any time.
A HECS-HELP debt is incurred for any University course you have specified to receive HELP assistance for soon following the elected ‘census’ date.
Am I eligible for HECS-HELP?
- be a long-term resident of New Zealand with a New Zealand Special Category Visa; or
- by the census date (or earlier administrative deadline), submit a valid Request for Commonwealth Support and HECS-HELP form to your university.
When do I need to start repaying my HECS-HELP loan?
Once your Repayment Income (RI) exceeds the minimum payback threshold for compulsory repayment, you can begin repaying your HECS-HELP debt. Once your taxable income reaches a particular amount, that is.
For 2020-21, the minimal RI level for making a loan repayment is $46,620. If your income exceeds this level, your income tax assessment will include a mandatory repayment of at least 1% of your income. As your income rises, so does the percentage.
How to check your HECS-HELP debt balance
- On the myGov website, you can check your HECS-HELP balance. You’ll need to link your account with the ATO so that they have all of your information. You can check your balance online from here.
How to repay you HECS-HELP debt though the taxation system
Make sure you tell your new boss you have a HELP debt when you start a new job. This is accomplished by checking a box on the TAX DECLARATION FORM before beginning work.
Based on your yearly RI, your employer will withhold additional tax from each pay to satisfy your estimated HECS-HELP debt burden. This reimbursement should be covered by the additional tax withheld by your employer.
NOTE: Your employer only withholds the additional tax on the income you get from them. Other sources of income, such as second or previous jobs or investments, will not be taken into account, therefore you may have to make a top-up payment after filing your tax return.
You can make voluntary debt repayments to the ATO at any time using BPAY or a credit card. For further information on how to make repayments and when to do so, contact the ATO or your local H&R Block office.
Keeping receipts and claiming deductions for everything you’re entitled to will help you lower your RI and lessen the amount of money you have to pay back each year. To get the most out of your return, preserve all of your work-related receipts and seek guidance on what you can claim. Take a look at our website.
What is the combined HELP loan limit?
The combined HELP loan limit is a limit on the amount of money you can borrow from the Australian government to pay for your tuition fees. On January 1, 2020, the HELP loan limit replaced the FEE-HELP loan limit.
Do my past HELP or VSL debts count?
Yes. FEE-HELP, VET FEE-HELP, and VET Student Loan debts will be carried over and applied to your HELP loan limit.
The HELP loan limit will not apply to HECS-HELP debts with a census date prior to January 1, 2020.
The HELP loan ceiling will cover HECS-HELP obligations having a census date of 1 January 2020 or after.
What is the HELP loan limit amount?
The ceiling for students pursuing initial registration in medicine, dentistry, or veterinary science, as well as qualified aviation courses, is $155,448.
What is a renewable HELP balance?
Your available borrowing capacity for HECS-HELP, FEE-HELP, VET FEE-HELP, and VET Student Loans is your renewable HELP balance. This is the amount of HELP you have accessible.
How is my available HELP balance calculated?
Your available HELP balance is the difference between your HECS-HELP, FEE-HELP, VET FEE-HELP, and VET Student Loans borrowing and your HELP loan limit for that year.
If you take out a loan, your available HELP balance will be reduced, and if you repay it, your available HELP balance will be increased.
When do HELP balance credits start?
Beginning with the 2019-20 fiscal year, your available HELP balance will be credited.
Following the submission of your tax return, the Australian Taxation Office (ATO) will send you a notice of assessment and notify the department of any HELP debt repayments. These payments will be applied to your HELP account, reducing the available balance by the amount repaid.
What repayments credit my HELP balance?
When the ATO informs the department about your voluntary repayments, they will be applied to your HELP balance.
Your HELP balance will not be credited until you have completed your annual tax return and it has been processed by the ATO.
Why is my HECS debt increasing?
HELP debts are not subject to interest. On June 1st of each year, however, indexation is applied to your loan. Indexation is a method of revising your debt’s real worth to keep it in line with increases in the cost of living. HELP debts aren’t indexed until they’ve been outstanding for 11 months.
Should I pay down my HECS?
There are a number of elements to consider when deciding whether or not to make HECS repayments voluntarily, as depicted in the diagram above. I’ll go over each factor in depth now.
Should I make voluntary HECS repayments or pay down other debt?
Before making voluntary HECS repayments, it’s always a good idea to pay off other debts first. This is because the interest rate on your other loan is likely to be higher than the HECS indexation rate. This will assist your personal finances in the long run because you will pay less interest.
Should I make voluntary HECS repayments or save for future major expense?
If you need money for a large purchase in the future, such as a car or travel, you should save instead of making voluntary HECS repayments. This is done so that you can fulfill your future needs! If you’re just buying things on the spur of the moment, it’s wiser to pay off your HECS debt.
Should I make voluntary HECS repayments or focus on my emergency fund?
You might wonder why you should save money when your HECS debt is compounding at 1.8 percent per year and most high-interest savings accounts pay less than that. However, you are only required to make HECS repayments if your income exceeds the payback amount. It is preferable to have an emergency money on hand if you find yourself in a difficult position, such as losing your work. If things go tight, you’ll be better equipped to fulfill your other responsibilities, such as rent and utilities.
Should I make voluntary HECS repayments or invest my money?
It makes more sense to invest your money if you believe you can earn more than inflation by doing so. This is because you may be able to make more money than you save by paying off your HECS debt early.
Other factors
Other things to consider while deciding whether or not to make a voluntary HECS repayment are listed below. They are as follows:
- Are you on track to reach the HECS loan maximum, and do you have plans to continue your education in the future?
- Will you take out a loan, such as a mortgage? Is it true that having HECS precludes you from borrowing money from a bank?
- Changes in the indexation rate – As previously stated, the indexation rate in 2012 was 2.9 percent. This rate can change from year to year.
Can I buy a house if my student loan is in default?
I won’t keep you waiting: you can secure a mortgage even if you have defaulted college loans. However, if you have defaulted federal student loans and are applying for an FHA, VA, or USDA loan, you must first get out of default before your application can be accepted.
This is why: Until you do, your name will appear on the Credit Alert Verification Reporting System (CAIVRS). This will prevent you from receiving a mortgage approval.
Continue reading to learn more about CAIVRS, how your name became up there, and your options for removing CAIVRS before the deadline.
